Italy's new premier to push growth agenda in Europe after winning vote

By Roberto Landucci and Steve Scherer

ROME (Reuters) - New Italian Prime Minister Enrico Letta won a final confidence vote in his broad coalition government on Tuesday before setting off on a European tour to push his agenda of growth rather than austerity to revive the recession-hit economy.

Even before departure, Letta came under pressure from the partners in his right-left government to re-negotiate Rome's commitment to keeping its budget within European Union rules. It was an early indication of the difficult juggling act he faces at the head of an uneasy coalition.

Letta, who was sworn in on Sunday, easily won a confidence vote in the Senate after a similar victory in the lower house on Monday.

He immediately set off for Berlin to meet Chancellor Angela Merkel, the champion of Europe's increasingly unpopular tight budget policies.

On Wednesday, Letta travels to Paris where he is likely to find an ally in French President Francois Hollande, who is also pushing for a switch of emphasis towards growth rather than austerity. Letta will go to Brussels, where he plans talks with European Commission President Jose Manuel Barroso.

The 46-year-old Letta took the helm of an economy, the euro zone's third biggest, in the midst of a severe crisis, with unemployment at 20-year highs and the recession, already matching the longest since World War Two, seen dragging on all year.

In a sign of the intense pressure he will face, four-times Prime Minister Silvio Berlusconi threatened to pull his center-right People of Freedom party out of the coalition if it does not abolish an unpopular housing tax.

Berlusconi, who is not in cabinet but is playing a decisive role behind the scenes, added that the government must re-negotiate EU deficit commitments, echoing similar comments made earlier by two of Letta's own ministers.

DISAGREEMENT OVER BUDGET CHANGES

But Foreign Minister Emma Bonino, a former European commissioner, responded that Italy cannot alter its targets, a view repeated by a spokesman for the European Commission in Brussels.

"The targets, the objectives remain those that have been agreed," Commission spokesman Simon O'Connor said.

Speaking in the Senate before the confidence vote, Letta argued that Italy's need to ease austerity during the economic slump was shared by many European countries.

"What is happening in Italy is happening all over Europe," Letta said. "Either there is a common European destiny or each country will eventually decline on its own."

On Tuesday Industry Minister Flavio Zanonato and Regional Affairs Minister Graziano Delrio said Italy would seek to exempt public investments from budget calculations, which would in effect allow increased spending.

Italy's 2013 deficit target now stands at 2.9 percent of gross domestic product target, just a notch below the EU ceiling.

The country's biggest labor unions on Tuesday said they would hold a joint protest on June 22 to push for more job creating policies. The danger from rising social tensions was highlighted on Sunday in a dramatic gun attack on Rome.

An unemployed man opened fire on two police officers in front of the prime minister's office as Letta's government was being sworn in at the presidential palace. He told investigators he had wanted to strike at politicians before being stopped at a police cordon.

To ease the pain of austerity, Letta has proposed freezing a planned increase in sales tax and suspending the housing levy opposed by Berlusconi, although he has not said he would scrap it altogether as the center-right is demanding.

Those two measures alone will cost about 4 billion euros ($5.24 billion) in lost revenue this year, and labour unions are asking that the government set aside another billion euros to fund benefits for idled factory workers. Letta has not given details of how he would raise revenue to fund tax reductions.

($1 = 0.7634 euros)

(With additional reporting by Giuseppe Fonte; writing by Steve Scherer; editing by Barry Moody)

Source: http://news.yahoo.com/italy-pm-letta-wins-final-confidence-vote-122020904.html

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